Investor Presentation - Barnes & Noble, Inc.

Investor PresentationOctober 27, 2009

AgendaBKS and Industry OverviewOperations OverviewDigital Strategy OverviewBarnes & Noble College OverviewFinancial OverviewClosing RemarksSteve RiggioChief Executive Officer, Barnes & Noble, Inc.Mitch KlipperChief Operating Officer, Barnes & Noble, Inc.William LynchPresident, Barnes & Noble.comMax RobertsPresident, Barnes & Noble College Booksellers, LLCJoe LombardiChief Financial Officer, Barnes & Noble, Inc.Steve RiggioChief Executive Officer, Barnes & Noble, Inc.Q&A3

BKS and Industry OverviewSteve RiggioChief Executive OfficerBarnes & Noble, Inc.

Barnes & Noble ‐ The World’s Largest Bookstore $6.8 billion in annual sales* #1 retail brand in America 724 trade bookstores 624 college bookstores World‐class e‐commerce site & infrastructure Digital commerce platform built nook eBook reader launched October 20 th*Annualized pro‐forma sales figure post‐college acquisition5

2009 – Initiatives & AccomplishmentsAcquired FictionwiseLaunched eBookstoreLaunched iPhone appsAcquired Barnes & Noble College BooksellersLaunched nook6

Trade Book Industry: A Large and Stable Market Larger than all other media businesses,AND it is undergoing consolidation Stable market in face of growth ofInternet, video games According to NEA, time spent readingincreasing Children’s and teen books are thefastest growing categories A long tail business: title outputcontinues to increase Print on demand keeps books alivelonger$ in billionsIndustry Revenues Digital delivery will serve as catalyst fornew forms of contentSource: Veronis Suhler Stevenson, Communications Industry Forecast, 20097

Strong Long‐Term Demographic TrendsPopulation GrowthUS Enrollment in All Degree‐Granting InstitutionsAge 2000 ‐ 2010 2010 ‐ 2020< 18 4.0% 8.6%18 ‐ 24 13.2% 0.3%25 ‐ 44 ‐2.3% 8.0%45 ‐ 64 30.7% 4.2%65 ‐ 85 31.6% 33.6%Source: US Census BureauSource: National Center for Education StatisticsDemographic Trends continue to be favorable for the Industry8

Reading on the Rise Absolute number of literary readers hasgrown significantly Over 113 million Americans read at leastone book in the past year Literary reading has increased among bothmen and women Reading rates have grown or held steady foradults of all education levels Reading has increased at the sharpest rateamong Hispanic Americans (+20%) and among African Americans (+15%) Fiction (novels and short stories) accounts for the new growth in adult literary readers Reading has increased most rapidly among the youngest adults (18 –24 years old) The growth in new readers (+16.6 million adults) reflects higher adult reading ratescombined with population growthSource: National Endowment for the Arts, Reading on the Rise9

Competitive Landscape – BooksellersStrongest real estate footprintBest execution– Comp sales– Sales per sq ft– Inventory turnsStrongest supply chain systemsExtensive multi‐channelintegrationMember program still growing10

Competitive Landscape ‐ Discounters and Mass MerchantsImpact already absorbedDollars Spent per ChannelCaters to casual buyersStill a long tail business thatdiscounters do not serveAND ‐ bestsellers are less than5% of B&N salesSource: Bowker, 2008 U.S. Book Consumer Demographics & Buying BehaviorsAnnual Report11

Competitive Landscape – DigitalFew companies have all thecomponents in placeLeaders must deliver portabilityacross devices and across “time”Requires extensive customerservice capabilitiesLate entries face formidablecontent aggregation challengeMarket likely to be less fragmentedthan retail12

Operations OverviewMitch KlipperChief Operating OfficerBarnes & Noble, Inc.

Barnes & Noble Booksellers14

15Flagstaff, AZ

Farmers Market, CA16

17Palm Dessert, CA

18Manchester, CT

West Palm Beach, FL19

20Glendale, WI

21Power Plant, Baltimore, MD

Barnes & Noble BooksellersFavorite destination, communitycenterAttracts families with childrenStrong ties to local schoolsCustomized selection down to thecommunityStore manager input into selectionResponsive daily ordering systems“If we don’t have it, we’ll get it foryou”22

Children and Teen BooksFastest Growing Part of our Business23

New Growth OpportunitiesEducational Toys & GamesNurture infants senses andskillsSpark creativity andimaginationEncourage natural curiosityInspire a love of learning24

New Growth OpportunitiesBarnes & Noble @ SchoolHundreds of workbooks anddevelopment titlesNew arts & crafts suppliesFlashcard and teacherresource materialsClassroom decorations andaward stickers25

Strong Financial MetricsExpanded gross margins in2008 despite sales deleverage– Sales mix– Improved shrink rate– Inventory managementImproved inventory turnPrudently manage payrolland expect to maintain anapproximately flat SG&A rateat core businessGross MarginInventory TurnAdditionalbenefits toMemberprogram26

Real Estate Strategy Superior locationsSign short‐term leases (typically 10years with options) Flexibility to relocate stores at theend of the terms to accommodatethe ever‐changing retail landscape27

Real Estate OverviewApproximately 400 leases upfor renewal in next 48 monthsHighly desirable tenantAnchor statusExperienced real estate teamFiscal Year # of Leases2010 442011 872012 1242013 1102014 7928

Barnes & Noble.comWilliam LynchPresidentBarnes & Noble.com

Barnes & Noble.comScalable business with lots of room to growNew management on board,significant upgrade in tech talentInfrastructure investments behind usWe deliver large selection and fastshippingOur marketplace sales are growingConsistently high customer servicerankingsFaster innovation in search,personalization & easy orderingTesting new product categories30

Key Trends on the Business are PositiveDouble digit traffic growthAccelerating top‐line growthAccelerating growth incustomer file31

Digital Strategy Every device strategy: PC’s, Macs,SmartPhones, dedicated eReaders Establish “white label” deals withleading hardware/telcos Price competitive: bestsellers & newreleases $9.99 DRM technology enables ala carte,subscription, book + digital upgrade Tens of millions of sku’s: books,textbooks, magazines, newspapers,blogs Aligned with leading tech partners:Adobe, Plastic Logic, IREX Proprietary device: nook Leverage online/in‐store synergy33

nook: Loads of Innovation3G wireless accessColor touch screen navigationeInk TM display for readingAndroid TMSuperior PDF capabilityWi‐fi enables FREE browsing inany B&N storeDigital lending technology34

nook: Early Reviews35

nook: Building an Eco‐SystemAccessoriesWarrantiesAdditional Content36

nook: Marketing724624Barnes & NobleBookstoresBarnes & NobleCollege Stores40,000BooksellersBarnes & Noble.com37

QUE TM proReader by Plastic LogicQue TM to be sold byBarnes & Noble inbookstores and onlineFeatured near the nook inbookstoresProvides access to theBarnes & Noble eBookstore38

eBook Devices –Latest ForecastRaised 2009 eBook device sales forecasts to 3 million units (from2 million previously)2010 sales are expected to doublePredicts 900,000 units will sell during holidaysCumulative eReader sales of 10 million units by the end of 2010Source: Forrester Research, 10/06/0939

Digital Content: A Multi‐Billion Dollar Market Enhanced eBooks Supplementary content postpublication New forms of content (serial novels,alternate endings, collaborativewriting...) eBook + "p" book combos Subscriptions: newspapers,magazines, blogs “Ala cart" purchasing of archivedand historic newspaper andmagazine content Professional, technical & academicjournals40

Barnes & Noble College OverviewMax RobertsPresidentBarnes & Noble College Booksellers, LLC

Overview of Barnes & Noble College Bookstores Leading contract operator of bookstoreson college campuses in the U.S. Pioneer in the academic bookstore format 624 college bookstores across U.S. Traditional Bookstores (603 stores):700 to 35,000 square feet Collegiate Superstores (21 stores):22,000 to 65,000 square feet Sells textbooks, course‐related materials,apparel and gifts, trade books, school anddorm supplies, convenience and caféitems > 20% of college bookstores operated byCollege use the Barnes & Noble brand42

Large Market Supported by Excellent Fundamentals $10 billion market with strong growth profile – 65% of collegebookstores still operated by schools themselves Strong demographic trends Excellent visibility and minimal sensitivity to economic cycle Stable contract base with long‐standing relationships and highrenewal rates Low‐risk business model: 75% of inventory is books returnable topublishers Ample growth opportunities in very fragmented market43

Strong Long‐Term Demographic TrendsAmericans continue to increasespending on higher educationAverage Spending on Higher EducationAs % Of Total Personal ConsumptionUS college enrollment projected togrow 26% from 2000 to 2013US Enrollment in AllDegree-Granting InstitutionsCollege Enrollment (in millions)Source: Bureau of Labor Statistics Data44Source: National Center for Education Statistics

Growth of Market Economic downturn has historicallyincreased enrollment as workersretool & hone their skills Colleges & Universities turn tooutsourcing to offset budget gaps andmonetize their inventory Federal Stimulus and currentAdministration Policy is focused onHigher Education Community Colleges and nonselectivepublic institutions haveunprecedented enrollment Met current year forecasts45

Leading Market Position with Growth Opportunities2,000+ Institutions Still Operate Own BookstoreApproximately 65% of the marketContract Management RationaleSelect Campus RelationshipsFinancial pressure on schools– School‐run bookstores can beunprofitable– Frees up working capital– Existing stores may requiresignificant capital investmentKey component of campusrejuvenation planImproved storemanagement/service levels46Boston UniversityColumbia UniversityDePaul UniversityGeorgia Institute of TechnologyHarvard CoopKentucky Community & Technical College SystemsThe Ohio State UniversityThe Pennsylvania State University SystemRochester Institute of TechnologySanta Clara UniversityTexas A&M UniversityUniversity of Central FloridaThe University of ChicagoUniversity of MemphisUniversity of MichiganUniversity of Nevada, Las VegasUniversity of PennsylvaniaWashington State UniversityYale University

Typical Management Contract Terms Generally structured as management agreements:– No conveyance of interest in real property– 90 to 120‐day cancellation by either party with no residual obligations– Limited inventory risks– Reimbursed capital expenditures on termination of contract– Operating policies and pricing agreed upon with schools Official university bookstore Multi‐year agreements Renewed over 93% of contracts that were up for renewal over thelast five years Payments to schools are based on a percentage of sales usuallywith a minimum fixed guarantee Capital investments vary based on other financial terms and lengthof contract47

Role and Process Make us Relevant to CampusBuying decisions are made on a campus‐by‐campus basisWe collect 2.5 million adoptions representing 208,000 titlesfrom over 8,000 publishersOnly 300 of these titles had chain‐wide sales of 5,000 units ormore and 21% of these titles were “custom” publicationsunique to the campusWe are the original just‐in‐time model with no warehousesUnsold new textbooks and used textbooks are returnable topublishers and MBS Textbook Exchange, Inc. respectively48

Well Positioned to Provide Complete Digital SolutionMost schools have unique websites– Fast and friendly one‐stop textbook ordering process– Links to the registration process– Over 20 product categories for emblematic apparel & gifts– Can become a platform for digital intellectual propertyWe have provided digital textbooks since 2003We currently offer over 7,700 “mainstream” textbooks indigital format49

Financial OverviewJoe LombardiChief Financial OfficerBarnes & Noble, Inc.

State of the Consumer Book MarketBKS has 17% market shareBook sales forecasted to growat a CAGR of 2.3% over thenext 5 years*– New book sales: 0.9% CAGR– Digital Platforms: 47.2% CAGReCommerce channel growingfaster than bookstore channelBKS has strong balance sheet$ in billionsU.S. Consumer Book Market**Source: Veronis Suhler Stevenson, Communications Industry Forecast, 200951

Barnes & Noble College – Business OverviewFiscal 2010First Quarter Second Quarter Third Quarter Fourth Quarter Full Year(May – July) (Aug. – Oct.) (Nov. – Jan.) (Feb. – April) (May – April)Actual* Projected Projected Projected ProjectedSales $216 $825 $575 $193 $1,808% of total sales 12% 46% 32% 11%Margin Rate 23.7% 21.1% 20.0% 25.0% 21.5%SG&A $61 $79 $71 $62 $273EBITDA ($10) $95 $44 ($14) $115*Unaudited52

Barnes & Noble Business Overview($ in millions)Pre‐CollegeAcquisitionImpact ofCollegeAcquisitionConsolidatedPro‐FormaResultsSales $5,000 $1,808 $6,808Gross Margin Rate 30.6% 21.5% 28.2%SG&A $1,215 $273 $1,488EBITDA $315 $115 $430Estimates based on the approximate midpoint of the range of previously issued guidance.53

Compelling Free Cash Flow DynamicsImpact of ConsolidatedPre‐College College Pro‐FormaAcquisition Acquisition ResultsSales $5,000 $1,808 $6,808Pro‐Forma EBITDA $315 $115 $430Capex $125 $45 $170Interest Paid $2 $42 $44Taxes Paid $50 $15 $65Free Cash Flow $138 $13 $151All numbers presented on a pro‐forma annualized basis.Estimates based on the approximate midpoint of the range of previously issued guidance.54

NYSE: BKSCompelling free cash flow dynamicsStrong balance sheetAcquired Barnes & Noble CollegeDigital investmentsOnly bookseller positioned to compete in‐store,online and digitally55

Closing RemarksSteve RiggioChief Executive OfficerBarnes & Noble, Inc.

Investment Considerations ‐ Well Positioned Market Leader#1 retail brandStrong and flexible real estate portfolioe‐commerce channel growingnook poised to gain significant share in growing digitalarenaCollege business strengthens companyStrong management team in each business57